Benefits and risks of allowing enterprises to borrow gold from the public.

An advocacy to permit enterprises that manufacture and trade gold jewelry to borrow gold from the public at negotiated interest rates is presented as a way to unlock the flow of gold, turning idle household assets into input for production. However, behind this seemingly rational idea lie a series of risks that are difficult to control. Risks of market instability and cascading risk: The proposal to allow gold mobilization for production could create instability in the monetary and financial markets. If a firm borrows gold from residents, it would owe the principal and interest in gold, while its revenue is largely in Vietnamese dong. This creates a significant risk mismatch, especially given volatile gold prices. Example: A firm borrows 50 taels of gold to manufacture and sell jewelry. After selling products, it earns dong and uses that money to buy back the gold to repay the loan. If gold prices rise sharply as in 2024–2025 (at times 30–40% or more), the money earned may be insufficient to repurchase the borrowed gold. The firm would likely incur losses. Even more dangerous, if this occurs across many firms, a cascading failure of the system could occur. The gold market is highly sensitive; a shock could be sparked by a few weak links. History has shown cases where gold shops borrowed gold from residents and later could not repay when prices rose, leading to disputes and erosion of trust. According to Mr. Hiển, even a small spark can spread, affecting not only the gold market but also the financial system and the economy. Risks for enterprises and calls for transparency: In an interview with Tiên Phong, Mr. Nguyễn Quang Huy — a finance and banking expert at Nguyễn Trãi University — argues that if a firm borrows gold from the public, even if it pays interest, this is not a simple civil transaction but a lending activity. Thus, standardization, collateral, and market discipline become mandatory requirements. According to Mr. Huy, a key question is: What happens if the enterprise experiences financial difficulties or ceases operations? The obligation to repay gold could be interrupted, while the public lacks deposit-like protections. He advocates strict eligibility criteria for participants, including financial capacity, compliance history, and risk-management capabilities. The mobilization scale should be limited to align with equity to avoid leverage risk. Transparency is essential. Enterprises should periodically disclose mobilization size, intended use of gold, and related risks. Independent audits should be mandatory to verify obligations and assets. "In the context of Vietnam's push to limit the goldization of the economy, reopening a gold mobilization mechanism should be weighed carefully. A feasible approach is a pilot with a small scale, restricted participants, and tight oversight. Mobilizing gold from the public is a noteworthy idea to tap social resources; however, it is not a magic wand that can immediately solve the input problem for the jewelry industry. If not designed with coherent legal frameworks, risk controls, and information transparency, this policy could create greater market instability." said Mr. Huy, adding that the question is not simply whether to do it but how to do it to harness the public's gold resources safely while protecting the financial system and public trust. Read more